Economic and Financial Management: Impact on Business and Accounting Ratios

ECONOMIC AND
FINANCIAL MANAGEMENT

Executive Summary
Economics and financial management are seen as closely related as FM emphasize on managing
the funds for achieving objectives of the company. Economics focuses on using, creating and
transferring the commodities where microeconomics relates specifically with individuals and the
business decisions & macroeconomics focus on broader view of government implication on
nation economy. The present study is based on Sainsbury, a second leading supermarket chain in
UK having around 502 supermarket and the convenience stores. Furthermore, the report provides
deeper insights towards an effect of economic factors on the business and an importance of
accounting ratios. Moreover, comparative assessment would be made for three years in order to
analyse trend of company’s performance.

Table of Contents
INTRODUCTION...........................................................................................................................4
a. Assessment of an economic factors and its effect on business................................................4
b. computing ratios for 3 years....................................................................................................6
c. Explaining the meaning of accounting ratios and its significance in the business..................8
d. Recommendations..................................................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES................................................................................................................................1

INTRODUCTION
Financial management refers to the strategic planning and organizing and directing the
financial undertakings in an organization. While, economic factor are that factor which deals
with tax rates, unemployment and polices. These factor creates both positive and negative impact
upon business such that inflation rate creates opposite impact while, decrease in tax rate affect
business in positive manner. Therefore, these economic factor may create hinder and success of
the business. Further, the current report will describe how the macro as well as micro- economic
factor affect the business using diagrams. Also, current study will describe some financial ratio
of Sainsbury for each consecutive years i.e. return on capital employed, net profit margin, current
ratio, debtor collection period, creditor payment period and efficiency ratio with their
importance. Last, report will recommend three strategic actions that a company should take by
evaluating the financial performance of company.
a. Assessment of an economic factors and its effect on business
Economic factors are stated as the factors that impact an overall economy and the
business that involves tax rates, wages, governmental activities, interest rates etc. there are
mainly two major economic factors that has a great impact on the business organizations that
includes macro and micro economic factors.
Macro economic factors referred as the factor that affects national economy as a whole
while a micro economic factor impacts business and an individual’s (Fernández, González and
Rodriguez, 2018). Major macro-economic factors that influence the business are unemployment,
interest rate, inflation and economic output. Main micro-economic factors that impact the
business are employees, competitors, shareholders, suppliers and the customers.